Investing in capabilities: The dynamics of resource allocation

Corinne A. Coen, Catherine A. Maritan

Research output: Contribution to journalArticlepeer-review

52 Scopus citations


In this research, we examine the dynamic capability of resource allocation to invest in operational capabilities. Using a computer simulation, we model a process of firms competing in factor markets for opportunities to invest in existing capabilities and acquire new ones. Based on the simulation results, we derive a set of propositions about the conditions under which there are and are not performance benefits from possessing a superior ability to search for new capabilities. Because the definition of what constitutes a new capability is based on a firm's preexisting capabilities, we also incorporate differences in initial endowments into the analysis. We find that endowment and search ability both matter, and that in many circumstances, the effects of possessing a superior endowment dominate the effects of superior search ability.

Original languageEnglish (US)
Pages (from-to)99-117
Number of pages19
JournalOrganization Science
Issue number1
StatePublished - Jan 2011


  • Agent-based model
  • Computer simulation
  • Dynamic capabilities
  • Factor market
  • Investment
  • Resource allocation

ASJC Scopus subject areas

  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation


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